Question

Problem 130 The net changes in the balance sheet accounts of Eusey, Inc. for the year 2018 are shown below: Account Debit Credit Cash $ 91,200 Accounts recelvable s 48,500 Allowance for doubtful accounts 10,100 Inventory 197,600 Prepaid expenses Long-term investments 18,500 144,500 Land 385,000 Buildings 649,500 Machinery Equipment 100,000 28,300 Accumulated depreciations Buildings 24,300 Machinery Equipment Accounts payable 20,300 12.500 190,800 Accrued liabilities 73,100 Dividends payebles 128,000 36,000 900,000 Premium on bonds Bonds payable Preferred stock ($50 par) 60,000 156.000 Common stock ($510 par) Addtional paid-in captal-comman 223,200 Retained earnings 87,200 $1,792,300 $1,792,300 Additional information: 1. Net income $140,000 2. Cash dividends of $128,000 were declared December 15, 2018, payable January 15, 2019. A 5 % stock dividend was issued March 31, 2018, when the market value was $22.00 per share. 3. The long-term investments were sold for $140,000, 4. A building and land which cost $480,000 and had a book value of $350,000 were sold for $400,000. The cost of the land, indluded in the cost and book value above, was $20,000 5. The following entry was made to record an exchange of an old machine for a new one Machinery 160,000 40,000 Accumulated Depreciation-Machinery Machinery 60,000 Cash 140,000 6. A fully depreciated copler machine which cost $28,000 was written off 7. Preferred stock of $60,000 par value was redeemed for $80,000 8. The company sold 12,000 shares of its common stock ($10 par) on June 15, 2018 for $25 a share. There were 87.600 shares outstanding on December 31, 2018. 9. Bonds were soid at 104 on December 31, 2013 10. Land that was condemned had a book value of $240,500. Proceeds received totaled $10e,000 Prepare a statement of cesh fows (indirect method). Ignore tax effects (Show amounts that decrease cash low with aith sign eg-15,000 or inparenthenis eg(15,000). Eusey, Inc. Statement of Cash Flows For the Year Ended December 31, 2018 Increase (Decrease) in Cash Adjustments to reconcle net Income to

Answer 1

Eusey, Inc. Statement of Cash Flows For the Year Ended December 31, 2018 Increase (Decrease) in Cash Cash Flow from Operating Activities Net Income 140,000 Adjustment to reconcile net income to Net Cash provided by the operating activities Depreciation expense - Building (1) 154,300 Depreciation expense - Machinery (2) 60,300 Depreciation expense Equipment (3) Gain on sale of Land and Building (4) 15,800 - (50,000) Loss on sale of Long-term Investment (5) 4,500 Decrease in Accounts receivable, net (6) Increase in Inventory Increase in Prepaid Expense Decrease in Accounts payable 58,600 (197,600) (18,500) (190,800) Increase in Accrued Liabilities 73,100 Loss on Condemnation of Land (240,500 108,000) 132,500 42,200 Net Cash provided by the operating activities 182,200

Cash Flow from Investing Activities Proceeds from sale of Long-term Investment 140,000 Proceeds from Condemnation of Land 108,000 Proceeds from Sale of Building and Land 400,000 Payment for purchase of Land (7) (645,500) Payment for Purchase of Building (8) (1,109,500) (140,000) Payment for Purchase of Machinery (1,247,000) Net Cash used by Investing Activities Cash flow from Financing Activities Proceeds from Issue of Bonds (9) 936,000 Issue of Common stock (12,000 x $25) 300,000 Retirement of Preferred Stock (80,000) Net Cash Provided by Financing Activities 1,156,000 Net Increase in Cash 91,200

Working Notes (1) Depreciation expense on Building Net Change in Accumulated Depreciation Building Add: Accumulated Depreciation on Building Sold Cost of Building sold Less: Book value 24,300 480,000 (350,000) 130,000 Depreciation on Building 154,300 (2) Depreciation expense on Machinery Net Change in Accumulated Depreciation Machinery Add: Accumulated Depreciation on Machinery Exchange 20,300 40,000 Depreciation on Machinery 60,300 (3) Depreciation on Equipment Net Change in Accumulated Depreciation - Equipment Add: Equipment write off Depreciation on Equipment (12,500) 28,300 15,800 (4) Gain on sale of Land and Building Sale proceeds Less: Book value Gain on sale of Land 400,000 (350,000) 50,000 (5) Loss/(Gain) on sale of Long-term Investment Change in Long-term Investment Sale proceeds of Long-term Investment Loss on sale of Long-term Investment (144,500) 140,000 (4,500)

(6) Decrease in Accounts receivable, net Change in Accounts receivable Change in Allowance for doubtful debts Decrease in Accounts receivable, net 48,500 10,100 58,600 (7) Purchase of Land Net Change in Land Add: Cost of Land sold Add: Book value of Land Condemned Purchase of Land 385,000 20,000 240,500 645,500 (8) Purchase of Building Net change in Builidng Add: Cost of Building Sold (480,000 Purchase of Building 649,500 20,000) 460,000 1,109,500 (9) Proceeds from Issue of Bonds Change in Bonds Payment |Change in Premium on Bonds Payable Proceeds from issue of Bonds 900,000 36,000 936,000 Note: Change in Equipment in 28,300 but copier machine write off is 28,000.Therefore, Total Write off is 28,300.